thanks P13-2-Breakeven comparisons; Algebraic Given the price and cost data show
ID: 2635785 • Letter: T
Question
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P13-2-Breakeven comparisons; Algebraic Given the price and cost data shown in the accompanying table for each of the three firms, F, G, and H, answer the questions that follow
Firm F G H
Sales price per unit $18.00 $21.00 $30.000
Variable operating cost per unit 6.75 13.50 12.00
Fixed operating cost 45,000 30,000 90,000
a) What is the operating breakeven point in units for each firm?
b) How would you rank these firms in term of risk?
Explanation / Answer
Computation of operating breakeven point:
F G H
Sales price per unit $18.00 $21.00 $30.00
Less: Variable cost per unit $6.75 $13.50 $12.00
Contribution per unit $11.25 $7.50 $18.00
Fixed Cost $45000 $30000 $90000
Break even point(units) = Fixed cost/contribution per unit 4000 4000 5000
ii) Ranking in terms of risk 1 3 2
As contribution % is highest in case of firm F hence it should be given as 1st preference while firm G given as third preference.
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